Things you need to know:

• It’s Window Dressing time! – End of Quarter
• Trump gets Putin to sit at the energy table – Oil rallies
• China reports Expansionary PMIs? (Suspect)
• US data begins to show collapse – Retailers furlough workers
• Try the Veal Rollatini

KENNY POLCARI, Editor
Chief Market Strategist, and Consultant

Circuit breaker limits today

Level 1 – S&P must fall 7% – 183.87 pts

Level 2 – S&P must fall 13% – 341.46 pts

Level 3 – S&P must fall 20% –525.33 pts.

Stocks rallied again on Monday with the Dow adding 690 pts or 3.19%, the S&P jumping 85 pts or 3.35%, the Nasdaq surging by 271 pts or 3.62% and the Russell tacking on 26 pts or 2.6% – as it is end of quarter “Window Dressing” time. For those of you unfamiliar – window dressing refers to actions taken prior to issuing quarter end financial statements in order to improve the appearance of the financial statements.  So consider this – the market has taken a beating during the past six weeks – stocks have fallen 5%, 10% and some as much as 50% or 60% during this rout. So names that you hold or names that the portfolio manager holds have seen a reassignment of value (that’s a fancy way of saying that some stocks have gotten clobbered). So it makes perfect sense to take advantage of the “sale on Wall Street.” This is what a good wealth manager does and it is what you would expect him/her to do in the face of such a gift.  Now I say “gift” because in the long term – it is – it is an opportunity for you or your wealth manager to “pick up” some names whose fundamental story has NOT changed but whose price has! Think about it – Apple at $212/share on March 23rd was selling for a 34% discount to where it was trading on Feb. 12. If you liked Apple (and who doesn’t?) at $325 – then you have to LOVE it at $212. That is just one story – there are so many of them that went on sale and if you were savvy enough – and had the stomach – then you stayed the course and you continued to commit money to the plan. Yesterday saw Tech (XLK) up 4.4%, Healthcare (XLV) up 4.7%, Financials (XLF) up 1.9%, Consumer Staples up 2.6%, Communications stocks (XLC) up 3.65%.

Well – portfolio managers do the same thing. This is never more evident than when stock prices have “re-priced” as the government forced a recession and then the government and the FED join in to support the economy. Then you have quarter end – a perfect time for you or your portfolio manager to take advantage of the dislocation created by the algos responding to the headlines with little or no understanding of the devastation they cause. And I say this because why? The algos sold Apple off 34% in four weeks and then in the last five days. They took it back up 20% – why? Has anything really changed? Apple did not change who they were. Apple is still Apple,

But you can argue that the headlines have gotten worse: more infections, more deaths, more states closing borders, more airlines coming under pressure, more people filing for unemployment, more regional fed surveys coming unglued, more businesses shuttering their doors. Huge losses in GDP will materialize and a complete collapse in OIL over the past month. Yet the rally continues, with the broader market up 22% in the last week. Why? Because as usual the pendulum swings way too far to the left as much as it swings way too far to the right – all driven by technology that can’t seem to control itself. But in all that noise – is opportunity – capisce?

Now yes – this isn’t over by any stretch of the imagination. In fact, it is still gonna get worse before it gets better. The East coast of the US is about to get slammed and then it will take another five or six weeks to wash across the nation – taking democrats and republicans, famous and not so famous people with it. We will hear of moderate cases of the virus as well as horror story cases of the virus. In any event – the world will not stop spinning and we will return to what we remember as “normal” and stocks and the global economy will return to being priced on fundamentals rather than hysteria…

And yes – we are going into a forced recession. How can we not? – the government has all but guaranteed it. The government has all but guaranteed that we will emerge from it relatively quickly – because they manufactured it. Now they are supporting it. So once we get through this, demand will come roaring back, businesses will re-open, planes will fly, (cruise ships might have an issue – but…) demand for energy will surge, oil will rebalance, unemployment will plunge again and the sun will shine.

Next – Oil continued to get slammed yesterday as the Saudi’s and the Russians refuse to come to the table to discuss production limits, flooding the market with oil at a time when institutional demand is collapsing. Yesterday – oil fell by 5.5% ending the day at $20.35/barrel – an 18-year low. Overnight, oil is up 5%, at $21.23/barrel as the Russians agree to come to the table. They agreed to meet with Donny to discuss stabilizing the energy markets – this even as the Saudis plan on boosting its exports to 10.6 mbd (Million Barrels/day) as domestic consumption falls. $20/barrel appears to be support – the next couple of days will reveal if this is true.

Overnight – US futures are UP and Down, as the window dressing continues. Dow futures are up 19 pts, S&Ps are ahead by 3 pts, the Nasdaq is adding 40 pts and the Russell is down 1 pt. Now while many are now saying that the lows are in, it is too soon to call the bottom just yet. Tomorrow begins a new quarter – so essentially – the slate gets wiped clean. Do not be surprised to see it back off as we enter April and the data begins to show a complete meltdown, (temporary as it may be). The lows of 2300 will most likely be tested. Earnings are set to begin in two weeks, ex-dividend dates are set for next week – JPM and JNJ (both DOW stocks) to launch the beauty pageant on April 14. What will we hear? Forget about the earnings – those are expected to be horrendous. What investors want to hear is what does the future look like? Will this forced recession end soon, or have we created a disaster for the US and the global economy? Is that a light at the end of the tunnel or is that a train coming down the tracks?  Because there is a difference…

Overnight – Asian markets were mixed. But China reported a SURGE in the ‘Official’ manufacturing activity – reporting March PMI (Purchasing Managers Index) of 52 (expectation was for 45) and Non-Manufacturing PMI of 52.3 – back in EXPANSIONARY mode. This is after they reported a February PMI of 35.7! Now take it with a grain of salt – EVERY data point out of China is suspect – whether its economic or whether it’s the coronavirus death count as the Chinese government is attempting to project strength and not weakness. Other monthly data points are expected to be weak – with Industrial Production falling 11.6% and Retail Sales falling by 6% – but those numbers are due next week. Tomorrow will bring the Caixin Private PMI Survey and IHS Markit Survey- will they report the same bullishness? Remember – China is very dependent upon the rest of the world – so if the rest of the world is in a deep recession – it is almost impossible for China to report better and stronger numbers just yet – just sayin’

By the end of the day – we saw Japan fall 0.88%, Hong Kong +1.85%, China +0.33% and ASX – 2.02%.

In Europe – the markets are off to the races. The positive PMI data out of China is being cited as the reason for the excitement. I mean – investors and algos WANT to believe, they want to see a turnaround, they want to see an end to this nightmare. But remember – it is the end of the quarter – so expect more window dressing. The rally in oil is also helping the mood. Economic data out of Spain reports that fourth quarter GDP grew by 0.4% – making the years annual GDP come in at 1%.

At 6 am – we see the FTSE +1.89%, CAC 40 +1.34%, DAX +2.54%, EUROSTOXX +1.77%, SPAIN +1.67% AND ITALY 1.62%

The S&P closed at 2626 – well ahead of the 2300/2500 range I have been talking about. That’s good – but I’m not convinced yet that there isn’t further weakness ahead. Yesterday’s Dallas Fed’s Survey plummeted to -70. Major retailers announcing furloughs – Macy’s, the Gap, (think Banana Republic and Old Navy), Rent the Runway and L Brands are just a few. Economic data later this week will add to the story – ADP employment figures due out tomorrow suggest 150k job LOSSES while Friday’s NFP (Non-Farm Payroll) report is expected to show a loss of 100k jobs. Both numbers I think are underestimating what the actual numbers will be. Thursday’s Initial Jobless Claims are expected to show an increase of another 3.5 million job losses while Continuing Claims surges to 4.8 mil jobs. The data is just hitting the US – the numbers will be shocking – expect Washington to begin discussing the “next” round of support for the US economy.

Gold is trading lower as stocks trade higher – giving the sense that the worst is behind us. This morning gold is trading at $1618/oz., down $25. The improving China data being cited as one of the reasons behind the weakness while a boycott by the Russian Central Bank is the other reason. Offering no explanation – the Russians announced that they will stop buying gold as of tomorrow. Gold should find support at $1600/oz. – its 50 day moving average trend-line. If it fails to hold there – then look for $1555 – the intermediate term trend line.

Take good care.

Kenneth Polcari
Chief Market Strategist, Consultant
[email protected]

Veal Rollatini w/Prosciutto, Red Onion, Arugula and Fresh Mozzarella

For this you need: Veal cutlets, Prosciutto, sliced fresh mozzarella, arugula, red onion, butter, oil, s&p and some beef broth.

Preheat your oven to 350 degrees.

Begin by seasoning the cutlets… then take one – lay it flat on the cutting board, place a slice of prosciutto, a slice of the mozz, a slice of red onion and some arugula. Roll it and pin it with a toothpick – set aside and repeat.

Place a dollop of butter and a splash of olive oil in a frying pan and turn the heat to high… When it’s almost sizzling – add the rolled cutlets and brown on all sides… this might take all of 5 mins… Place in a baking dish – now add more butter to the pan along with a 1/2 cup of beef broth (you could use a dry white wine if you prefer) and let it come to a boil – deglaze the pan and then add to the baking dish so that the rollatini are just bathing… cover and place in the oven and cook for another 10 mins max.

Remove and place on a serving platter – serve with an herb seasoned rice pilaf and a mixed green salad dressed in oil and fresh lemon juice, s&p and dried oregano.  Simple easy and it takes all of 30 mins start to finish.

Buon Appetito.